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Renewables Update

How Japan has managed to substitute nuclear power and the trade balance consequences
in Japanese

In mid-March 2011, the Fukushima Dai-ichi nuclear power plant experienced several core melts, and emissions of radioactive substances into the Pacific Ocean started. As this was contrary to earlier assurances that the nuclear power plants were designed to withstand the earthquakes that could shake Japan, as well as consequent tsunamis, public trust for the industry was lost. In the following year reactors could not get permission to restart after closing and for a short period in 2012, and again for part of 2013 and all of 2014, all nuclear power plants in Japan were closed. At the end of 2016, about 34 ‘operational’ nuclear GW in Japan had been shut down for a capacity-weighted average of 5.2 years, many with dubious restart prospects—though Japan still insists that the International Atomic Energy Agency count them all as ’operational’ in apparent violation of IAEA definitions ⅰ .

In the fiscal year (FY) 2015 (April 1 2015 – March 31 2016), two reactors in Sendai were operating during a part of the year delivering 9,4 TWh of electricity. This was 279 TWh less then what the total nuclear fleet of more than 50 reactors delivered in FY2010. We will use FY2010 as our baseline even though it includes the 20 days after the Fukushima disaster—yet nuclear power delivered more electricity in FY2010 than in FY2009, making our comparison conservative.

Energy efficiency, savings and renewable power provide more than fossil fuels

A first assessment is just to compare electricity generation in FY2015 with the electricity generation in FY2010, all based on IEA data ⅱ .

Total generation decreased from 1 148 TWh to 1 015 TWh. As Japan has an isolated electricity system, and does not import or export electricity, consumption always equals production. The decrease in production is the result of improved energy efficiency, ie the same energy service provided using less energy, and energy savings where the energy service level is decreased. The latter has been achieved partly by voluntarily accepting higher indoor temperatures during the air conditioning season.

In addition, electricity generation based on renewable energy has increased by 45 TWh. The remaining production lost due to nuclear reactors’ not operating was 100 TWh, and that was compensated by increased generation from fossil fuels.

Thus, in FY2015, fossil-fuelled generation made up more than one-third of the nuclear power lost. Efficiency, savings, and renewable energy together provided more than half of the compensation for nuclear power lost.

However, to describe fully the importance of efficiency one may also take into account that the economy has grown during this period. As described by the Japanese government statistics ⅲ Japan’s GDP has risen by almost 5% from FY2010 to FY2015. If the economy’s electric intensity had been constant, electricity consumption would thereby have increased by 57 TWh, to 1 205 TWh by FY2015.

As a result of the economic growth during the five years the electricity system not only had to compensate for the loss of nuclear power but also had to power economic growth. Thus the need would be expected to be 336 TWh of new electricity, assuming constant efficiency.

Relative to this expected need, the decreased actual electricity consumption represents an even larger achievement of efficiency and saving; Figure 2 shows that together they contributed more than half, 57%, of this demand, while fossil fuels met less than one third of this greater challenge.

Figure 2. Substitution of electricity expected for lost nuclear electricity, including efficiency, calculated based on economic growth from FY2010 to FY2015.

More fossil-fuel imports, but at lower cost

This does not change the absolute numbers of increase in fossil and renewable generation, but does reduce their share. Still, the increased reliance on imported fossil fuels is significant, and the cost of this import was initially severe for Japan’s balance of trade.

However, the cost of importing fossil fuels depend not only on the amount imported but also on the unit price of the fuel.

More than three-quarters of the increased electricity generation from fossil fuels is based on LNG. Data from Japan’s ministry of finance ⅳ show that although the amount of LNG imported in 2016 was almost 20% larger than in 2010, the total price paid for this larger import was smaller than in 2010, because LNG prices meanwhile fell.

This was due to several developments. Fracking technology has increased the supply of oil and gas in North America, reducing prices there. Renewable generation of electricity has lowered electricity prices and made gas-fired power stations less utilised than previously intended, mainly in Europe, thus reducing demand. Finally, after a period of high prices for LNG-shipping capacity, mainly due to Japan’s increased demand, shipping prices again fell.

Figure 3. Amount of LNG imported to Japan and cost of that import 2010–2016. Data from Japan Ministry of Finance.

By 2016 Japan has shown how renewable energy and efficiency has directly and indirectly benefited energy-importing countries

After five years, Japan has used energy savings, improved efficiency, and renewable energy sources to avoid most of the predicted negative effects.

The closing of the majority of Japan’s nuclear reactors initially appeared to have severe consequences from increased burning of fossil fuels and resulting emissions as well as significantly higher payments for imported fossil fuels. As five years have passed, the consequences have turned out to be far less severe then anticipated. The main reason is that energy efficient technologies and renewable power technologies grew very rapidly, directly replacing a total of 70% of FY2010 nuclear production in just five years. Just as importantly, these shifts, especially to renewables, and not just in Japan but also elsewhere in the global market made LNG (and other fuels) not scarce but plentiful and thus reduced the price of the imported fossil fuels.

Despite policymakers’ and utilities’ continuing efforts to suppress windpower and slow solar growth in Japan, renewable energy continue, along with continuing efficiency gains, to take nuclear power’s former market share.

Decision-makers in utilities and government face a challenging reality. When 70% of the FY2010 nuclear output is replaced by renewable energy, efficiency and savings in just five years (or 64% without adjusting for economic growth), there may be little market demand for nuclear power by the time a significant number of reactors can return to service. As nuclear plants face vanishing markets for their output, and electricity demand continues stagnant or falling, the economic rationality in adding a further 45 coal-fired power plants is in doubt.

In Japan, the way of thinking about electricity supply may change as a result.